Paychecks take a double hit from income tax hike starting Aug. 1

Many Connecticut wage earners will notice their paychecks shrinking faster than anticipated starting this August, when the Department of Revenue Services begins implementing the new $875 million state income tax increase.

That's because the tax hike, which adds three new tax rates, reduces a property tax credit and adds an earned income credit for poor families, is retroactive to Jan. 1, but won't be drawn from paychecks until August.

That means the state's tax agency, which released new withholding tables this week, has five months to collect 12 months' worth of tax obligations. For the 22 weeks between Aug. 1 and Dec. 31, the additional withholding will be about 2.4 times the increase that will be applied starting in January 2012.